Partner
Communications Company Ltd. (“Partner” or the “Company”)
(NASDAQ and TASE: PTNR), a leading Israeli communications provider,
announced today its results for the quarter ended March 31, 2019.
Commenting on the results for the first quarter of 2019, Mr. Isaac
Benbenisti, CEO of Partner noted:
“In a saturated communications market, Partner succeeded in
starting the year 2019 with positive momentum. Partner’s fiber optics
infrastructure already reaches more than 400 thousand households in more
than half of Israel’s cities across the country, and Partner TV
continues to be the fastest growing television service in Israel with
over 152 thousand subscribers.
In the cellular segment, we continued to maintain a low rate of churn by
focusing on existing customers. This strategy is also reflected in the
moderate decrease in ARPU we recorded compared to the previous quarter
and the corresponding quarter in 2018.
In recent months, we have focused on the strategy of providing value to
Partner’s customers in all areas of the Group’s business: cellular,
internet, television and the business division. This strategy is
expected to bring results both on the revenue side and in increasing
customer loyalty with respect to all lines of products and services.
As part of this strategy, we are establishing a dedicated customer
service division that will handle all of our private customers’ needs,
across cellular and fixed line segments. We believe that this will
further strengthen Partner’s industry-leading level of service, and
differentiate us from all other players in the communications market.
Alongside continued growth in television and accelerated deployment of
the fiber optics infrastructure, we succeeded in maintaining a net debt
level of under NIS 1 billion. Partner’s financial strength offers us
considerable flexibility for making strategic investments and for
expanding activity in new and existing business areas.”
Mr. Tamir Amar, Partner’s Chief Financial Officer, commented on the
results:
“Partner closed another quarter characterized by significant competition
in its operating segments, achieving relative stability in service
revenues compared to the previous quarter, while continuing to grow its
fixed line segment activity, both in the number of subscribers and in
revenues. In the cellular segment, where competition continues to be
high, we continued to maintain a relatively low churn rate, which was
unchanged compared to the previous quarter and declined compared to the
corresponding quarter last year, and relatively low ARPU erosion by,
among other things, strategically focusing on customers that offer value
for the Company.
At the beginning of January 2019, an amendment to the network sharing
agreement between the Company and HOT Mobile was signed, as a result of
which, from the beginning of this year, the accounting treatment for the
jointly owned partnership with HOT mobile, PHI, is as a joint operation
instead of through the equity method. Therefore, the Company’s relative
share (50%) in PHI’s assets and liabilities was added to the Company’s
balance sheet. The change did not materially affect the Company’s
statement of income.
Starting with the first quarter of 2019, the Company adopted the new
accounting standard IFRS 16 – Leases, as required under IFRS. IFRS 16
requires the recognition of lease liability for lease payments and a
right-of-use asset, with respect to contracts that were previously
accounted for as operating leases. In the first quarter of 2019, the
impact of adopting IFRS 16 was an increase in Adjusted EBITDA for the
quarter by NIS 39 million.
We concluded the quarter with Adjusted Free Cash Flow (before interest
payments) of negative NIS 11 million. Cash flows from operating
activities totaled NIS 213 million. Lease payments, presented in cash
flows from financing activities, totaled NIS 39 million. CAPEX payments
totaled NIS 185 million, reflecting the Company’s strategy to continue
its leadership in telecommunications technologies with continued
significant investment in the Company’s fiber optics infrastructure.
This investment is only made possible by Partner’s strong balance sheet.
In addition, in recent months we have continued our preparations for our
future debt recycling with the private placement of untradeable option
warrants exercisable for the Company’s Series G debentures, thereby
arranging a significant portion of the Company’s expected funding
requirements for the years through 2021.”
Q1 2019 compared to Q4 2018
| NIS Million | Q4’18 | Q1’19 | Comments | |||
| Service Revenues | 625 | 624 |
The decrease resulted from decreases in cellular service revenues as a result of seasonality and price erosion, partially offset by an increase in fixed-line segment service revenues |
|||
| Equipment Revenues | 189 | 170 | The decrease mainly reflected a lower volume of equipment sales | |||
| Total Revenues | 814 | 794 | ||||
| Gross profit from equipment sales | 42 | 39 | ||||
| OPEX | 502 | 472 |
Excluding the impact of IFRS 16, OPEX would have totaled NIS 511 |
|||
| Adjusted EBITDA | 172 | 197 |
Excluding the impact of IFRS 16, Adjusted EBITDA would have |
|||
| Profit for the Period | 19 | 2 |
The decrease in profit was mainly a result of the decrease in Adjusted EBITDA excluding the impact of IFRS 16 (this also reflects the fact that the increase in depreciation expenses and in finance costs, net, due to IFRS 16 was of similar magnitude to the increase in Adjusted EBITDA due to IFRS 16) |
|||
| Capital Expenditures (additions) | 177 | 157 | ||||
| Adjusted free cash flow (before interest payments) |
(22) |
(11) |
Adjusted free cash flow increased mainly as a result of the increase in operating assets and liabilities partially offset by the decrease in Adjusted EBITDA (excluding the impact of IFRS 16) |
|||
| Net Debt | 950 | 977 |
| Q4’18 | Q1’19 | Comments | ||||
| Cellular Post-Paid Subscribers (end of period, thousands) | 2,361 | 2,340 | Decrease of 21 thousand subscribers | |||
|
Cellular Pre-Paid Subscribers (end of period, thousands) |
285 | 280 |
Decrease of 5 thousand subscribers |
|||
| Monthly Average Revenue per Cellular User (ARPU) (NIS) | 57 | 56 | ||||
| Quarterly Cellular Churn Rate (%) | 8.5% | 8.5% |
Key Financial Results Q1 2019
compared to Q1 2018
| NIS MILLION (except EPS) | Q1’18 | Q1’19 | % Change | |||
| Revenues | 826 | 794 | -4% | |||
| Cost of revenues | 688 | 677 | -2% | |||
| Gross profit | 138 | 117 | -15% | |||
| Operating profit | 32 | 9 | -72% | |||
| Profit for the period | 9 | 2 | -78% | |||
| Earnings per share (basic, NIS) | 0.05 | 0.01 | ||||
| Adjusted free cash flow (before interest) | 21 | (11) |
Key Operating Indicators
| Q1’18 | Q1’19 | Change | ||||
| Adjusted EBITDA (NIS million) | 177 | 197 | +11% | |||
| Adjusted EBITDA margin (as a % of total revenues) | 21% | 25% | +4 | |||
| Cellular Subscribers (end of period, thousands) | 2,649 | 2,620 | -29 | |||
| Quarterly Cellular Churn Rate (%) | 8.9% | 8.5% | -0.4 | |||
| Monthly Average Revenue per Cellular User (ARPU) (NIS) | 58 | 56 | -2 |
Partner Consolidated Results
| Cellular Segment | Fixed-Line Segment | Elimination | Consolidated | |||||||||||||||||||
| NIS Million | Q1’18 | Q1’19 | Change % | Q1’18 | Q1’19 | Change % | Q1’18 | Q1’19 | Q1’18 | Q1’19 | Change % | |||||||||||
| Total Revenues |
644 |
583 | -9% |
225 |
252 | +12% |
(43) |
(41) |
826 |
794 | -4% | |||||||||||
| Service Revenues |
466 |
441 | -5% |
202 |
224 | +11% |
(43) |
(41) |
625 |
624 | -0% | |||||||||||
| Equipment Revenues |
178 |
142 | -20% |
23 |
28 | +22% | – | – |
201 |
170 | -15% | |||||||||||
| Operating Profit |
22 |
9 |
-59% |
10 |
0 | – | – |
32 |
9 | -72% | ||||||||||||
| Adjusted EBITDA |
134 |
150 | +12% |
43 |
47 | +9% | – | – |
177 |
197 | +11% | |||||||||||
Financial Review
In Q1 2019, total revenues were NIS 794 million (US$ 219
million), a decrease of 4% from NIS 826 million in Q1 2018.
Service revenues in Q1 2019 totaled NIS 624 million (US$ 172
million), a decrease of NIS 1 million from NIS 625 million in Q1 2018.
Service revenues for the cellular segment in Q1 2019 totaled NIS
441 million (US$ 121 million), a decrease of 5% from NIS 466 million in
Q1 2018. The decrease was mainly the result of the continued price
erosion of cellular services (both Post-Paid and Pre-Paid) due to the
continued competitive market conditions.
Service revenues for the fixed-line segment in Q1 2019 totaled
NIS 224 million (US$ 62 million), an increase of 11% from NIS 202
million in Q1 2018. The increase reflected revenues from TV services and
internet services, which were partially offset principally by the
decline in revenues from international calling services.
Equipment revenues in Q1 2019 totaled NIS 170 million (US$ 47
million), a decrease of 15% from NIS 201 million in Q1 2018, mainly
reflecting a lower volume of equipment sales and a change in product mix.
Gross profit from equipment sales in Q1 2019 was NIS 39
million (US$ 11 million), compared with NIS 43 million in Q1 2018, a
decrease of 9%, mainly reflecting the decline in sales volumes,
partially offset by higher profit margins from sales due to a change in
the product mix.
Total operating expenses (‘OPEX’) totaled NIS 472 million (US$
130 million) in Q1 2019, a decrease of 5% or NIS 26 million from Q1
2018. The decrease mainly reflected the effect of the implementation of
IFRS 16 which totaled NIS 39 million, a decrease in credit losses, and a
decrease in costs related to international calls. These decreases were
partially offset by an increase in expenses relating to the growth in TV
and internet services. Including depreciation and amortization expenses
and other expenses (mainly amortization of employee share based
compensation), OPEX in Q1 2019 increased by 3% compared with Q1 2018.
Operating profit for Q1 2019 was NIS 9 million (US$ 2 million), a
decrease of 72% compared with operating profit of NIS 32 million in Q1
2018. Excluding the adoption of IFRS 16, operating profit in Q1 2019
would have been NIS 4 million. See Adjusted EBITDA analysis for each
segment below.
Adjusted EBITDA in Q1 2019 totaled NIS 197 million (US$ 54
million), an increase of 11% from NIS 177 million in Q1 2018. The impact
of the adoption of IFRS 16 on Adjusted EBITDA in Q1 2019 was an increase
of NIS 39 million and, therefore, excluding the impact of IFRS 16,
Adjusted EBITDA would have been NIS 158 million. As a percentage of
total revenues, Adjusted EBITDA in Q1 2019 was 25% compared with 21% in
Q1 2018.
Adjusted EBITDA for the cellular segment was NIS 150 million (US$
41 million) in Q1 2019, an increase of 12% from NIS 134 million in Q1
2018, mainly reflecting the impact of the adoption of IFRS 16 which
increased cellular segment Adjusted EBITDA by NIS 34 million, and a
decrease in cellular operating expenses (OPEX), which were partially
offset by decreases in service revenues and in gross profit from
cellular equipment sales. As a percentage of total cellular segment
revenues, Adjusted EBITDA for the cellular segment in Q1 2019 was 26%
compared with 21% in Q1 2018.
Adjusted EBITDA for the fixed-line segment was NIS 47 million
(US$ 13 million) in Q1 2019, an increase of 9% from NIS 43 million in Q1
2018, reflecting the increases in fixed-line service revenues and in
gross profit from equipment sales, partially offset by the increase in
OPEX. The impact of the adoption of IFRS 16 in Q1 2019 on the Adjusted
EBITDA for the fixed-line segment was an increase of NIS 5 million. As a
percentage of total fixed-line segment revenues, Adjusted EBITDA for the
fixed-line segment in Q1 2019 was 19%, unchanged from Q1 2018.
Finance costs, net in Q1 2019 were NIS 14 million (US$ 4
million), a decrease of 22% compared with NIS 18 million in Q1 2018. The
decrease largely reflected the early loan repayment fee recorded in Q1
2018, partially offset by the impact of the adoption of IFRS 16 in Q1
2019, which resulted in an increase of NIS 5 million in finance costs.
Income tax expenses for Q1 2019 were an income of NIS 7 million
(US$ 2 million), compared with expenses of NIS 5 million in Q1 2018,
largely reflecting the loss before tax of NIS 5 million in Q1 2019
compared with profit before tax of NIS 14 million in Q1 2018.
Profit in Q1 2019 was NIS 2 million (US$ 1 million), compared
with a profit of NIS 9 million in Q1 2018, a decrease of 78%. The
impact of the adoption of IFRS 16 in Q1 2019 on profit was an immaterial
decrease of NIS 1 million.
Based on the weighted average number of shares outstanding during Q1
2019, basic earnings per share or ADS, was NIS 0.01 (US$ 0.003),
compared with basic earnings per share of NIS 0.05 in Q1 2018.
Cellular Segment Operational Review
At the end of Q1 2019, the Company’s cellular subscriber base
(including mobile data, 012 Mobile subscribers and M2M subscriptions)
was approximately 2.62 million, including approximately 2.34 million
Post-Paid subscribers or 89% of the base, and approximately 280 thousand
Pre-Paid subscribers, or 11% of the subscriber base.
During the first quarter of 2019, the cellular subscriber base decreased
by approximately 26 thousand. The Pre-Paid subscriber base decreased by
approximately 5 thousand, and the Post-Paid subscriber base decreased by
approximately 21 thousand.
The quarterly churn rate for cellular subscribers in Q1 2019 was
8.5%, compared with 8.9% in Q1 2018.
Total cellular market share (based on the number of subscribers)
at the end of Q1 2019 was estimated to be approximately 25%, unchanged
from Q1 2018.
The monthly Average Revenue per User (“ARPU”) for cellular
subscribers in Q1 2019 was NIS 56 (US$ 15), a decrease of 3% from NIS 58
in Q1 2018. The decrease mainly reflected the continued price erosion in
key cellular services due to the competition in the cellular market.
Funding and Investing Review
In Q1 2019, Adjusted Free Cash Flow (including lease payments) totaled
negative NIS 11 million (US$ -3 million), a decrease in Adjusted Free
Cash Flow of NIS 32 from positive NIS 21 million in Q1 2018.
Cash generated from operating activities increased by 36% from
NIS 157 million in Q1 2018 to NIS 213 million (US$ 59 million) in Q1
2019, mainly as a result of the adoption in Q1 2019 of IFRS 16, under
which lease payments are recorded in cash flows from financing
activities instead of in cash flows from operating activities, as well
as the impact of the change in the accounting treatment of PHI,
following the change in PHI’s governance (see below), where payments to
PHI for Right of Use of PHI’s assets which previously were recorded as
cash flows from operating activities under “Increase in deferred
expenses – right of use” are, as from Q1 2019, recorded as cash flows
from investing activities under “Acquisition of property and equipment”
and “Acquisition of intangible and other assets”.
Lease payments, recorded in cash flows from financing activities
under IFRS 16, totaled NIS 39 million in Q1 2019.
Cash capital expenditures (‘CAPEX payments’), as represented by
cash flows used for the acquisition of property and equipment and
intangible assets, were NIS 185 million (US$ 51 million) in Q1 2019, an
increase of 34% from NIS 138 million in Q1 2018, mainly reflecting the
impact of the change in the accounting treatment of PHI, as described
above, as well as increased investments in the fiber optics
infrastructure.
The level of Net Debt at the end of Q1 2019 amounted to NIS 977
million (US$ 269 million), compared with NIS 919 million at the end of
Q1 2018, an increase of NIS 58 million.
Change in PHI’s governance from the beginning
of 2019
At the beginning of January 2019, an amendment to the network sharing
agreement between the Company and HOT Mobile was signed, as a result of
which, control over the partnership, PHI, is now borne 50-50 by the
Company and HOT Mobile, and each nominates an equal number of directors
(three directors). Since, thereafter, decisions about the Relevant
Activities of PHI require the unanimous consent of both the Company and
HOT Mobile, PHI is considered a joint arrangement controlled by the
Company and HOT Mobile (joint operation). Therefore, from the beginning
of this year, PHI is accounted for as a joint operation by the Company,
and the Company recognizes its share (50%) in the assets, liabilities,
and expenses of PHI, instead of using the equity method for its PHI
interest.
This change was mainly reflected in the Company’s statement of financial
position at the beginning of 2019, with increases in non-current
right-of-use in leased assets of NIS 355 million, in current maturities
of lease liabilities of NIS 65 million, and in non-current lease
liabilities of NIS 290 million, and a recognition of property and
equipment and intangible assets of NIS 142 million, instead of deferred
expenses – right of use in PHI’s assets. The change was also reflected
in cash flows, where payments to PHI for Right of Use of PHI’s assets
which previously were recorded as cash flows from operating activities
under “Increase in deferred expenses – right of use” are now recorded as
cash flows from investing activities under “Acquisition of property and
equipment” and “Acquisition of intangible and other assets”. The change
did not materially affect the Company’s statement of income.
For additional details and implications, see note 9 to our consolidated
financial statements for the year ended December 31, 2018 and Item 5A.1d
in the Company’s Annual Report on Form 20-F for the year ended December
31, 2018, filed with the SEC on March 27, 2019.
IFRS 16
The new leases standard, IFRS 16, came into effect on January 1, 2019.
The standard primarily affects the accounting for the Group’s operating
leases. The Company applied the simplified transition approach and did
not restate comparative amounts. As at January 1, 2019, the Company
recognized in the statement of financial position (including Partner’s
share in PHI’s lease contracts) a Lease – right of use asset of NIS 656
million and a lease liability of NIS 683 million (current and
non-current). The accumulated retained earnings decreased by NIS 21
million and the deferred income tax asset has changed in an immaterial
amount.
In the first quarter of 2019, the impact of adopting IFRS 16 on the
consolidated statement of income amounted to a decrease of NIS 39
million in operating expenses (OPEX), an increase of NIS 35 million in
depreciation and amortization expenses and an increase of NIS 5 million
in finance costs, net, which resulted in an immaterial increase in
operating profit and an immaterial decrease in profit for the quarter.
Adjusted EBITDA for the quarter increased by NIS 39 million, with
Adjusted EBITDA for the cellular segment increasing by NIS 34 million
and Adjusted EBITDA for the fixed-line segment increasing by NIS 5
million.
Lease payments made in the first quarter of 2019 in an amount of NIS 39
million were recorded in the statement of cash flows under the cash
flows from financing activities instead of under cash flows from
operating activities.
Conference Call Details
Partner will hold a conference call on Thursday, May 30, 2019 at 10.00AM
Eastern Time / 5.00PM Israel Time.
To join the call, please dial the following numbers (at least 10 minutes
before the scheduled time):
International: +972.3.918.0685
North America toll-free: +1.866.860.9642
A live webcast of the call will also be available on Partner’s Investors
Relations website at: www.partner.co.il/en/Investors-Relations/lobby/
If you are unavailable to join live, the replay of the call will be
available from May 30, 2019 until June 14, 2019, at the following
numbers:
International: +972.3.925.5929
North America toll-free: +1.888.254.7270
In addition, the archived webcast of the call will be available on
Partner’s Investor Relations website at the above address for
approximately three months.
Forward-Looking Statements
This
press release includes forward-looking statements within the meaning of
Section 27A of the US Securities Act of 1933, as amended, Section 21E of
the US Securities Exchange Act of 1934, as amended, and the safe harbor
provisions of the US Private Securities Litigation Reform Act of 1995.
Words such as “estimate”, “believe”, “anticipate”, “expect”, “intend”,
“seek”, “will”, “plan”, “could”, “may”, “project”, “goal”, “target” and
similar expressions often identify forward-looking statements but are
not the only way we identify these statements. Specific statements have
been made regarding the expected benefits of the Company’s strategy to
provide value to its customers in all areas of its business; the
expectation to increase the Company’s differentiation and competitive
advantage by establishing a private customer service division; the
Company’s strategy to continue its leadership in telecommunication
technologies with continued significant investments in the Company’s
fiber optics infrastructure; and the Company’s preparations regarding
its future debt recycling in anticipation of the Company’s expected
funding requirements for the years through 2021. In addition, all
statements other than statements of historical fact included in this
press release regarding our future performance are forward-looking
statements. We have based these forward-looking statements on our
current knowledge and our present beliefs and expectations regarding
possible future events. These forward-looking statements are subject to
risks, uncertainties and assumptions, including, whether quality offers,
attractive service bundles or low prices offered by the Company’s
competitors might prevent the Company from attracting and retaining
customers; whether market conditions will support the Company’s goal to
create differentiation and a competitive advantage by establishing a
private customer service division; whether the Company’s financial
resources and technological capabilities in fiber optics will enable it
to continue to lead in telecommunication technology, and whether such
leadership might be challenged by capabilities developed by competitors
or by changes occurring in the regulatory environment; and whether
unanticipated demands on the Company’s financial resources might cause
the preparations for future debt recycling to fall short of the
Company’s needs. Future results may differ materially from those
anticipated herein. For further information regarding risks,
uncertainties and assumptions about Partner, trends in the Israeli
telecommunications industry in general, the impact of current global
economic conditions and possible regulatory and legal developments, and
other risks we face, see “Item 3. Key Information – 3D. Risk Factors”,
“Item 4. Information on the Company”, “Item 5. Operating and Financial
Review and Prospects”, “Item 8. Financial Information – 8A. Consolidated
Financial Statements and Other Financial Information – 8A.1 Legal and
Administrative Proceedings” and “Item 11. Quantitative and Qualitative
Disclosures about Market Risk” in the Company’s Annual Reports on Form
20-F filed with the SEC, as well as its immediate reports on Form 6-K
furnished to the SEC. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
The quarterly
financial results presented in this press release are unaudited
financial results.
The results were prepared in accordance
with IFRS, other than the non-GAAP financial measures presented in the
section, “Use of Non-GAAP Financial Measures”.
The financial information is presented in NIS millions (unless
otherwise stated) and the figures presented are rounded accordingly.
The convenience translations of the New Israeli Shekel (NIS) figures
into US Dollars were made at the rate of exchange prevailing at March
31, 2019: US $1.00 equals NIS 3.632. The translations were made purely
for the convenience of the reader.
Use of Non-GAAP Financial Measures
The following non-GAAP measures are used in this report. These measures
are not financial measures under IFRS and may not be comparable to other
similarly titled measures for other companies. Further, the measures may
not be indicative of the Company’s historic operating results nor are
meant to be predictive of potential future results.
| Non-GAAP Measure | Calculation | Most Comparable IFRS Financial Measure | ||
|
Adjusted EBITDA
Adjusted EBITDA margin (%) |
Adjusted EBITDA: Profit (Loss) add Income tax expenses, Finance costs, net,
Depreciation and amortization expenses (including amortization of
Adjusted EBITDA margin (%): Adjusted EBITDA divided by Total revenues |
Profit (Loss) | ||
| Adjusted Free Cash Flow |
Adjusted Free Cash Flow:
Cash flows from operating activities deduct Cash flows from investing activities add Short-term investment in (proceeds from) deposits deduct Lease payments |
Cash flows from operating activities
deduct Cash flows from investing activities |
||
| Total Operating Expenses (OPEX) |
Total Operating Expenses:
Cost of service revenues add Selling and marketing expenses add General and administrative expenses deduct Depreciation and amortization expenses,
Other expenses (mainly amortization of employee share based |
Sum of: Cost of service revenues, Selling and marketing expenses, General and administrative expenses
|
||
| Net Debt |
Net Debt:
Current maturities of notes payable and borrowings add Notes payable add Borrowings from banks and others deduct Cash and cash equivalents deduct Short-term deposits |
Sum of:
Current maturities of notes payable and borrowings, Notes payable, Borrowings from banks and others |
About Partner Communications
Partner Communications Company Ltd. is a leading Israeli provider of
telecommunications services (cellular, fixed-line telephony, internet
services and TV services). Partner’s ADSs are quoted on the NASDAQ
Global Select Market™ and its shares are traded on the Tel Aviv Stock
Exchange (NASDAQ and TASE: PTNR).
For more information about
Partner, see: http://www.partner.co.il/en/Investors-Relations/lobby
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
New Israeli Shekels |
Convenience |
|||||
| December 31, | March 31, | March 31, | ||||
| 2018 | 2019* | 2019* | ||||
| (Audited) | (Unaudited) | (Unaudited) | ||||
| In millions | ||||||
| CURRENT ASSETS | ||||||
| Cash and cash equivalents | 416 | 295 | 81 | |||
| Short-term deposits | 303 | 83 | ||||
| Trade receivables | 656 | 643 | 177 | |||
| Other receivables and prepaid expenses | 33 | 48 | 14 | |||
| Deferred expenses – right of use | 51 | 26 | 7 | |||
| Inventories | 98 | 100 | 28 | |||
| 1,254 | 1,415 | 390 | ||||
| NON CURRENT ASSETS | ||||||
| Trade receivables | 260 | 261 | 72 | |||
| Prepaid expenses and other | 4 | 3 | 1 | |||
| Deferred expenses – right of use | 185 | 84 | 23 | |||
| Lease – right of use | 612 | 169 | ||||
| Property and equipment | 1,211 | 1,388 | 382 | |||
| Intangible and other assets | 617 | 597 | 164 | |||
| Goodwill | 407 | 407 | 112 | |||
| Deferred income tax asset | 38 | 45 | 12 | |||
| 2,722 | 3,397 | 935 | ||||
| TOTAL ASSETS | 3,976 | 4,812 | 1,325 | |||
* See section ‘IFRS 16’ above regarding the adoption of IFRS 16 – Leases.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
New Israeli Shekels |
Convenience |
|||||
| December 31, | March 31, | March 31, | ||||
| 2018 | 2019** | 2019** | ||||
| (Audited) | (Unaudited) | (Unaudited) | ||||
| In millions | ||||||
| CURRENT LIABILITIES | ||||||
| Current maturities of notes payable and borrowings | 162 | 161 | 44 | |||
| Trade payables | 711 | 723 | 198 | |||
| Payables in respect of employees | 96 | 102 | 28 | |||
| Other payables (mainly institutions) | 10 | 13 | 4 | |||
| Income tax payable | 35 | 28 | 8 | |||
| Lease liabilities | 141 | 39 | ||||
| Deferred revenues from HOT mobile | 31 | 31 | 9 | |||
| Other deferred revenues | 41 | 42 | 12 | |||
| Provisions | 64 | 58 | 16 | |||
| 1,150 | 1,299 | 358 | ||||
| NON CURRENT LIABILITIES | ||||||
| Notes payable | 1,013 | 1,237 | 341 | |||
| Borrowings from banks and others | 191 | 177 | 49 | |||
| Liability for employee rights upon retirement, net | 40 | 41 | 11 | |||
| Dismantling and restoring sites obligation | 13 | |||||
| Lease liabilities | 526 | 145 | ||||
| Deferred revenues from HOT mobile | 133 | 125 | 34 | |||
| Other non-current liabilities | 30 | 16 | 4 | |||
| 1,420 | 2,122 | 584 | ||||
| TOTAL LIABILITIES | 2,570 | 3,421 | 942 | |||
| EQUITY | ||||||
|
Share capital – ordinary shares of NIS 0.01
par value: authorized – December 31, 2018 and March 31, 2019 – 235,000,000 shares; issued and outstanding – |
2 | 2 | 1 | |||
| December 31, 2018 –***162,628,397 shares | ||||||
| March 31, 2019 – ***162,788,812 shares | ||||||
| Capital surplus | 1,102 | 1,090 | 300 | |||
| Accumulated retained earnings | 563 | 548 | 151 | |||
| Treasury shares, at cost | ||||||
| December 31, 2018 – ****8,560,264 shares | ||||||
| March 31, 2019 – ****8,401,523 shares | (261) | (249) | (69) | |||
| Non-controlling interests | * | * | * | |||
| TOTAL EQUITY | 1,406 | 1,391 | 383 | |||
| TOTAL LIABILITIES AND EQUITY | 3,976 | 4,812 | 1,325 | |||
* Representing an amount of less than 1 million.
** See section
‘IFRS 16’ above regarding the adoption of IFRS 16 – Leases. *** Net
of treasury shares.
**** Including restricted shares in
amount of 1,210,833 and 1,178,882 as of December 31, 2018 and March 31,
2019, respectively, held by a trustee under the Company’s Equity
Incentive Plan, such shares may become outstanding upon completion of
vesting conditions.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
New Israeli Shekels |
Convenience |
|||||
| 3 months ended March 31, | ||||||
| 2018 | 2019** | 2019** | ||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||
| In millions (except per share data) | ||||||
| Revenues, net | 826 | 794 | 219 | |||
| Cost of revenues | 688 | 677 | 186 | |||
| Gross profit | 138 | 117 | 33 | |||
| Selling and marketing expenses | 68 | 75 | 21 | |||
| General and administrative expenses | 45 | 39 | 11 | |||
| Other income, net | 7 | 6 | 2 | |||
| Operating profit | 32 | 9 | 3 | |||
| Finance income | 5 | 2 | * | |||
| Finance expenses | 23 | 16 | 4 | |||
| Finance costs, net | 18 | 14 | 4 | |||
| Profit (Loss) before income tax | 14 | (5) | (1) | |||
| Income tax expenses (income) | 5 | (7) | (2) | |||
| Profit for the period | 9 | 2 | 1 | |||
| Attributable to: | ||||||
| Owners of the Company | 9 | 2 | 1 | |||
| Non-controlling interests | * | * | ||||
| Profit for the period | 9 | 2 | 1 | |||
| Earnings per share | ||||||
| Basic | 0.05 | 0.01 | 0.003 | |||
| Diluted | 0.05 | 0.01 | 0.003 | |||
| Weighted average number of shares outstanding (in thousands) | ||||||
| Basic | 168,346 | 162,730 | 162,730 | |||
| Diluted | 169,356 | 163,251 | 163,251 | |||
* Representing an amount of less than 1 million.
** See section
‘IFRS 16’ above regarding the adoption of IFRS 16 – Leases.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
|
New Israeli Shekels |
Convenience |
|||||||
| 3 months ended March 31, | ||||||||
| 2018 | 2019** | 2019** | ||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||
| In millions | ||||||||
|
Profit for the period |
9 | 2 | 1 | |||||
|
Other comprehensive income
for the period, net of income taxes |
– | – | – | |||||
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 9 | 2 | 1 | |||||
| Total comprehensive income attributable to: | ||||||||
| Owners of the Company | 9 | 2 | 1 | |||||
| Non-controlling interests | * | * | ||||||
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 9 | 2 | 1 | |||||
* Representing an amount of less than 1 million.
** See section
‘IFRS 16’ above regarding the adoption of IFRS 16 – Leases.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM
SEGMENT INFORMATION & ADJUSTED EBITDA RECONCILIATION
| New Israeli Shekels | ||||||||||
| 3 months ended March 31, 2019** | ||||||||||
| In millions (Unaudited) | ||||||||||
|
Cellular |
Fixed-line |
Elimination |
Consolidated |
|||||||
| Segment revenue – Services | 437 | 187 | 624 | |||||||
| Inter-segment revenue – Services | 4 | 37 | (41) | |||||||
| Segment revenue – Equipment | 142 | 28 | 170 | |||||||
| Total revenues | 583 | 252 | (41) | 794 | ||||||
| Segment cost of revenues – Services | 347 | 199 | 546 | |||||||
| Inter-segment cost of revenues – Services | 37 | 4 | (41) | |||||||
| Segment cost of revenues – Equipment | 113 | 18 | 131 | |||||||
| Cost of revenues | 497 | 221 | (41) | 677 | ||||||
| Gross profit | 86 | 31 | 117 | |||||||
| Operating expenses (3) | 82 | 32 | 114 | |||||||
| Other income, net | 5 | 1 | 6 | |||||||
| Operating profit | 9 | * | 9 | |||||||
| Adjustments to presentation of segment | ||||||||||
| Adjusted EBITDA | ||||||||||
| –Depreciation and amortization | 137 | 47 | ||||||||
| –Other (1) | 4 | |||||||||
| Segment Adjusted EBITDA (2) | 150 | 47 | ||||||||
|
|
New Israeli Shekels | |||||||||
| 3 months ended March 31, 2019** | ||||||||||
| In millions (Unaudited) | ||||||||||
|
Reconciliation of segments subtotal Adjusted EBITDA to profit for the period |
||||||||||
| Segments subtotal Adjusted EBITDA (2) | 197 | |||||||||
| Depreciation and amortization | (184) | |||||||||
| Finance costs, net | (14) | |||||||||
| Income tax expenses | 7 | |||||||||
| Other (1) | (4) | |||||||||
| Profit for the period | 2 | |||||||||
* Representing an amount of less than 1 million.
** See section
‘IFRS 16’ above regarding the adoption of IFRS 16 – Leases. For
the 3 months ended March 31, 2019 the impact of the adoption of IFRS 16
was an increase of NIS 39 million in the Adjusted EBITDA, an increase of
NIS 34 million in the cellular segment Adjusted EBITDA and an increase
of NIS 5 million in the fixed-line segment Adjusted EBITDA.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM
SEGMENT INFORMATION & ADJUSTED EBITDA RECONCILIATION
| New Israeli Shekels | ||||||||||
| 3 months ended March 31, 2018 | ||||||||||
| In millions (Unaudited) | ||||||||||
|
Cellular |
Fixed-line |
Elimination |
Consolidated |
|||||||
| Segment revenue – Services | 461 | 164 | 625 | |||||||
| Inter-segment revenue – Services | 5 | 38 | (43) | |||||||
| Segment revenue – Equipment | 178 | 23 | 201 | |||||||
| Total revenues | 644 | 225 | (43) | 826 | ||||||
| Segment cost of revenues – Services | 365 | 165 | 530 | |||||||
| Inter-segment cost of revenues – Services | 38 | 5 | (43) | |||||||
| Segment cost of revenues – Equipment | 140 | 18 | 158 | |||||||
| Cost of revenues | 543 | 188 | (43) | 688 | ||||||
| Gross profit | 101 | 37 | 138 | |||||||
| Operating expenses (3) | 86 | 27 | 113 | |||||||
| Other income, net | 7 | 7 | ||||||||
| Operating profit | 22 | 10 | 32 | |||||||
| Adjustments to presentation of segment | ||||||||||
| Adjusted EBITDA | ||||||||||
| –Depreciation and amortization | 109 | 33 | ||||||||
| –Other (1) | 3 | |||||||||
|
Segment Adjusted EBITDA (2) |
134 | 43 | ||||||||
|
|
New Israeli Shekels | |||||||||
| 3 months ended March 31, 2018 | ||||||||||
| In millions (Unaudited) | ||||||||||
|
Reconciliation of segments subtotal Adjusted EBITDA to profit for |
||||||||||
|
Segments subtotal Adjusted EBITDA (2) |
177 | |||||||||
| Depreciation and amortization | (142) | |||||||||
| Finance costs, net | (18) | |||||||||
| Income tax expenses | (5) | |||||||||
| Other (1) | (3) | |||||||||
| Profit for the period | 9 | |||||||||
(1) Mainly amortization of employee share based compensation.
(2)
Adjusted EBITDA as reviewed by the CODM represents Earnings Before
Interest (finance costs, net), Taxes, Depreciation and Amortization
(including amortization of intangible assets, deferred expenses-right of
use and impairment charges) and Other expenses (mainly amortization of
share based compensation). Adjusted EBITDA is not a financial measure
under IFRS and may not be comparable to other similarly titled measures
for other companies. Adjusted EBITDA may not be indicative of the
Group’s historic operating results nor is it meant to be predictive of
potential future results. The usage of the term “Adjusted EBITDA” is to
highlight the fact that the Amortization includes amortization of
deferred expenses – right of use and amortization of employee share
based compensation and impairment charges.
(3) Operating expenses
include selling and marketing expenses, general and administrative
expenses.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
New Israeli Shekels |
Convenience |
|||||
| 3 months ended March 31, | ||||||
| 2018 | 2019** | 2019** | ||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||
| In millions | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
| Cash generated from operations (Appendix) | 157 | 213 | 59 | |||
| Income tax paid | * | * | * | |||
| Net cash provided by operating activities | 157 | 213 | 59 | |||
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||
| Acquisition of property and equipment | (98) | (142) | (39) | |||
| Acquisition of intangible and other assets | (40) | (43) | (12) | |||
| Investment in short-term deposits, net | (150) | (303) | (83) | |||
| Interest received | * | * | * | |||
| Consideration received from sales of property and equipment | 2 | * | * | |||
| Net cash used in investing activities | (286) | (488) | (134) | |||
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||
| Lease payments (principal and interest) | (39) | (11) | ||||
| Interest paid | (35) | (4) | (1) | |||
| Proceeds from issuance of notes payable, net of issuance costs | 223 | 61 | ||||
| Repayment of current borrowings | (13) | (4) | ||||
| Repayment of non-current borrowings | (300) | (13) | (4) | |||
| Net cash provided by (used in) financing activities | (335) | 154 | 41 | |||
|
DECREASE IN CASH AND CASH EQUIVALENTS |
(464) | (121) | (34) | |||
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
867 | 416 | 115 | |||
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
403 | 295 | 81 | |||
* Representing an amount of less than 1 million.
** See section
‘IFRS 16’ above regarding the adoption of IFRS 16 – Leases.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Appendix – Cash generated from operations and supplemental information
|
New Israeli Shekels |
Convenience |
|||||
| 3 months ended March 31, | ||||||
| 2018 | 2019** | 2019** | ||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||
| In millions | ||||||
| Cash generated from operations: | ||||||
| Profit for the period | 9 | 2 | 1 | |||
| Adjustments for: | ||||||
| Depreciation and amortization | 132 | 177 | 49 | |||
| Amortization of deferred expenses – Right of use | 10 | 7 | 2 | |||
| Employee share based compensation expenses | 4 | 4 | 1 | |||
| Liability for employee rights upon retirement, net | 1 | 1 | * | |||
| Finance costs, net | (2) | 5 | 1 | |||
| Interest paid | 35 | 4 | 1 | |||
| Interest received | * | * | * | |||
| Deferred income taxes | 3 | * | * | |||
| Income tax paid | * | * | * | |||
| Changes in operating assets and liabilities: | ||||||
| Decrease (increase) in accounts receivable: | ||||||
| Trade | 37 | 12 | 3 | |||
| Other | (7) | (12) | (3) | |||
| Increase (decrease) in accounts payable and accruals: | ||||||
| Trade | (10) | 40 | 11 | |||
| Other payables | (7) | 7 | 2 | |||
| Provisions | (2) | (6) | (2) | |||
| Deferred revenues from HOT mobile | (8) | (8) | (2) | |||
| Other deferred revenues | 1 | 1 | * | |||
| Increase in deferred expenses – Right of use | (27) | (12) | (3) | |||
| Current income tax liability | 2 | (7) | (2) | |||
| Decrease (increase) in inventories | (14) | (2) | * | |||
| Cash generated from operations | 157 | 213 | 59 | |||
* Representing an amount of less than 1 million.
** See section
‘IFRS 16’ above regarding the adoption of IFRS 16 – Leases.
At March 31, 2019 and 2018, trade and other payables include NIS 189
million ($52 million) and NIS 142 million, respectively, in respect of
acquisition of intangible assets and property and equipment; payments in
respect thereof are presented in cash flows from investing activities.
These
balances are recognized in the cash flow statements upon payment.
Reconciliation of Non-GAAP Measures:
|
Adjusted Free Cash Flow |
New Israeli Shekels |
Convenience |
||||
| 3 months ended March 31, | ||||||
| 2018 | 2019* | 2019* | ||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||
| In millions | ||||||
| Net cash provided by operating activities | 157 | 213 | 59 | |||
| Net cash used in investing activities | (286) | (488) | (134) | |||
| Investment in short-term deposits, net | 150 | 303 | 83 | |||
| Lease payments | (39) | (11) | ||||
| Adjusted Free Cash Flow | 21 | (11) | (3) | |||
| Interest paid | (35) | (4) | (1) | |||
| Adjusted Free Cash Flow After Interest |
(14) |
(15) | (4) | |||
|
Total Operating Expenses (OPEX) |
New Israeli Shekels |
Convenience |
||||
| 3 months ended March 31, | ||||||
| 2018 | 2019* | 2019* | ||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||
| In millions | ||||||
| Cost of revenues – Services | 530 | 546 | 150 | |||
| Selling and marketing expenses | 68 | 75 | 21 | |||
| General and administrative expenses | 45 | 39 | 11 | |||
| Depreciation and amortization | (142) | (184) | (51) | |||
| Other (1) | (3) | (4) | (1) | |||
| OPEX | 498 | 472 | 130 | |||
(1) Mainly amortization of employee share based compensation.
* See section ‘IFRS 16’ above regarding the adoption of IFRS 16 – Leases.
Key Financial and Operating Indicators
(unaudited) ****
| NIS M unless otherwise stated |
Q1′ 17 |
Q2′ 17 |
Q3′ 17 |
Q4′ 17 |
Q1′ 18 |
Q2′ 18 |
Q3′ 18 |
Q4′ 18 |
Q1′ 19 |
2017 |
2018 |
|||||||||||||
| Cellular Segment Service Revenues | 489 | 497 | 514 | 478 | 466 | 454 | 476 | 447 | 441 | 1,978 | 1,843 | |||||||||||||
| Cellular Segment Equipment Revenues | 145 | 145 | 138 | 182 | 178 | 157 | 143 | 165 | 142 | 610 | 643 | |||||||||||||
| Fixed-Line Segment Service Revenues | 194 | 192 | 194 | 197 | 202 | 210 | 220 | 220 | 224 | 777 | 852 | |||||||||||||
| Fixed-Line Segment Equipment Revenues | 18 | 14 | 22 | 22 | 23 | 20 | 25 | 24 | 28 | 76 | 92 | |||||||||||||
| Reconciliation for consolidation |
(43) |
(43) |
(42) |
(45) |
(43) |
(44) |
(42) |
(42) |
(41) |
(173) |
(171) |
|||||||||||||
| Total Revenues | 803 | 805 | 826 | 834 | 826 | 797 | 822 | 814 | 794 | 3,268 | 3,259 | |||||||||||||
| Gross Profit from Equipment Sales | 26 | 33 | 43 | 40 | 43 | 37 | 44 | 42 | 39 | 142 | 166 | |||||||||||||
| Operating Profit* | 105 | 118 | 92 | 0 | 32 | 22 | 48 | 14 | 9 | 315 | 116 | |||||||||||||
| Cellular Segment Adjusted EBITDA* | 187 | 210 | 189 | 124 | 134 | 126 | 145 | 119 | 150 | 710 | 524 | |||||||||||||
| Fixed-Line Segment Adjusted EBITDA* |
64 |
59 |
50 |
34 |
43 |
46 |
56 |
53 |
47 |
207 |
198 |
|||||||||||||
| Total Adjusted EBITDA* | 251 | 269 | 239 | 158 | 177 | 172 | 201 | 172 | 197 | 917 | 722 | |||||||||||||
| Adjusted EBITDA Margin (%)* | 31% | 33% | 29% | 19% | 21% | 22% | 24% | 21% | 25% | 28% | 22% | |||||||||||||
| OPEX* | 478 | 472 | 477 | 519 | 498 | 492 | 504 | 502 | 472 | 1,946 | 1,996 | |||||||||||||
| Income with respect to settlement agreement | ||||||||||||||||||||||||
| with Orange | 54 | 54 | 108 | |||||||||||||||||||||
| Finance costs, net* | 23 | 54 | 15 | 88 | 18 | 13 | 10 | 12 | 14 | 180 | 53 | |||||||||||||
| Profit (Loss)* | 64 | 46 | 54 | (50) | 9 | 2 | 26 | 19 | 2 | 114 | 56 | |||||||||||||
| Capital Expenditures (cash) | 82 | 76 | 105 | 113 | 138 | 104 | 117 | 143 | 185 | 376 | 502 | |||||||||||||
| Capital Expenditures (additions) | 58 | 78 | 107 | 174 | 113 | 98 | 111 | 177 | 157 | 417 | 499 | |||||||||||||
| Adjusted Free Cash Flow | 126 | 208 | 202 | 63 | 21 | 55 | 70 | (22) | (11) | 599 | 124 | |||||||||||||
| Adjusted Free Cash Flow (after interest) | 109 | 150 | 192 | (17) | (14) | 44 | 62 | (37) | (15) | 434 | 55 | |||||||||||||
| Net Debt | 1,415 | 1,081 | 887 | 906 | 919 | 893 | 898 | 950 | 977 | 906 | 950 | |||||||||||||
| Cellular Subscriber Base (Thousands)** | 2,658 | 2,662 | 2,677 | 2,662 | 2,649 | 2,623 | 2,630 | 2,646 | 2,620 | 2,662 | 2,646 | |||||||||||||
| Post-Paid Subscriber Base (Thousands)** | 2,259 | 2,273 | 2,306 | 2,308 | 2,318 | 2,323 | 2,333 | 2,361 | 2,340 | 2,308 | 2,361 | |||||||||||||
| Pre-Paid Subscriber Base (Thousands) | 399 | 389 | 371 | 354 | 331 | 300 | 297 | 285 | 280 | 354 | 285 | |||||||||||||
| Cellular ARPU (NIS) | 61 | 62 | 64 | 59 | 58 | 57 | 60 | 57 | 56 | 62 | 58 | |||||||||||||
| Cellular Churn Rate (%)** | 9.8% | 9.0% | 9.3% | 9.9% | 8.9% | 10.1% | 8.0% | 8.5% | 8.5% | 38% | 35% | |||||||||||||
| Number of Employees (FTE)*** | 2,580 | 2,582 | 2,696 | 2,797 | 2,778 | 2,808 | 2,821 | 2,782 | 2,897 | 2,797 | 2,782 |
* Figures from 2019 include impact of adoption of IFRS 16. See also
section ‘IFRS 16’ above.
** As from Q4 2018, M2M subscriptions are
included in the post-paid subscriber base on a standardized basis. This
change had the effect of increasing the Post-Paid subscriber base at
December 31, 2018, by approximately 34 thousand subscribers. See also
‘Cellular Segment Operational Review’ section.
*** Number of
employees (FTE) from 2019 includes the number of FTE of PHI on a basis
proportional to Partner’s share in the company (50%).
****See
footnote 2 regarding use of non-GAAP measures.
Disclosure for notes holders as of March 31, 2019
Information regarding the notes series issued
by the Company, in million NIS
| Series |
Original |
Principal on |
As of 31.03.2019 | Interest rate |
Principal repayment |
Interest |
Linkage | Trustee contact details | ||||||||||||||||
|
Principal |
Linked principal |
Interest accumulated |
Market value | From | To | |||||||||||||||||||
| D |
25.04.10
04.05.11* |
400
146 |
327 | 327 | ** | 328 |
1.477%
(MAKAM+1.2%) |
30.12.17 | 30.12.21 |
30.03, 30.06, |
Variable interest MAKAM (4) |
Hermetic Trust (1975) Ltd. Merav Offer. 113 Hayarkon St., Tel Aviv. Tel: 03-5544553. |
||||||||||||
|
F
(1) (3) |
20.07.17
12.12.17* 04.12.18* |
255
389 150 |
794 | 794 | 5 | 792 | 2.16% | 25.06.20 | 25.06.24 | 25.06, 25.12 | Not Linked |
Hermetic Trust (1975) Ltd.
Merav Offer. 113 Hayarkon St., Tel Aviv. Tel: 03-5544553. |
||||||||||||
|
G
(2) (3) |
06.01.19 | 225 | 225 | 225 | 2 | 231 | 4% | 25.06.22 | 25.06.27 | 25.06 | Not Linked |
Hermetic Trust (1975) Ltd.
Merav Offer. 113 Hayarkon St., Tel Aviv. Tel: 03-5544553. |
||||||||||||
(1) In December 2018, the Company issued an additional Series F Notes in
a principal amount of NIS 150 million. In December 2017 and January
2018, the Company entered into agreements with Israeli institutional
investors to issue in December 2019, in the framework of a private
placement, additional Series F notes, in an aggregate principal amount
of NIS 227 million. S&P Maalot has rated the additional deferred
issuances with an ‘ilA+’ rating. For additional details see the
Company’s press releases dated September 13 and 17, 2017, December 27,
2017 and January 9, 2018.
(2) In January 2019, the Company issued
Series G Notes in a principal amount of NIS 225 million.
In April
2019, the Company issued in a private placement 2 series of untradeable
option warrants that are exercisable for the Company’s Series G
debentures. The exercise period of the first series is between July 1,
2019 and May 31, 2020 and of the second series is between July 1, 2020
and May 31, 2021. The Series G debentures that will be allotted upon the
exercise of an option warrant will be identical in all their rights to
the Company’s Series G debentures immediately upon their allotment, and
will be entitled to any payment of interest or other benefit, the
effective date of which is due after the allotment date. The debentures
that will be allotted as a result of the exercise of option warrants
will be registered on the TASE. The total amount received by the Company
on the allotment date of the option warrants is NIS 37 million. The
total consideration expected to the Company in respect of the allotment
of the option warrants and in respect of their full exercise (and
assuming that there will be no change to the exercise price) is
approximately NIS 323.7 million. For additional details see the
Company’s press release dated April 17, 2019.
(3) Regarding Series
F and G Notes, the Company is required to comply with a financial
covenant that the ratio of Net Debt to Adjusted EBITDA shall not exceed
5. Compliance will be examined and reported on a quarterly basis. For
the definitions of Net Debt and Adjusted EBITDA see ‘Use of non-GAAP
measures’ section above. For the purpose of the covenant, Adjusted
EBITDA is calculated as the sum total for the last 12 month period,
excluding adjustable one-time items. As of March 31, 2019, the ratio of
Net Debt to Adjusted EBITDA was 1.3. Additional stipulations regarding
Series F and G Notes mainly include: shareholders’ equity shall not
decrease below NIS 400 million and NIS 600 million, respectively; the
Company shall not create floating liens subject to certain terms; the
Company has the right for early redemption under certain conditions; the
Company shall pay additional annual interest of 0.5% in the case of a
two-notch downgrade in the Notes rating and an additional annual
interest of 0.25% for each further single-notch downgrade, up to a
maximum additional interest of 1%; the Company shall pay additional
annual interest of 0.25% during a period in which there is a breach of
the financial covenant. In any case, the total maximum additional
interest for Series F and G, shall not exceed 1.25% or 1%, respectively.
For more information see the Company’s Annual Report on Form 20-F for
the year ended December 31, 2018.
In the reporting period, the
Company was in compliance with all financial covenants and obligations
and no cause for early repayment occurred.
(4) ‘MAKAM’ is a
variable interest based on the yield of 12 month government bonds issued
by the government of Israel. The interest rate is updated on a quarterly
basis.
* On these dates additional Notes of the series were issued. The
information in the table refers to the full series.
** Representing
an amount of less than NIS 1 million.
Disclosure for Notes holders as of March 31, 2019 (cont.)
Notes Rating Details*
| Series | Rating Company |
Rating as of |
Rating |
Recent date of |
Additional ratings between the original issuance date and the recent date of rating (2) |
|||||||
| Date | Rating | |||||||||||
| D | S&P Maalot | ilA+ | ilAA- | 01/2019 and 04/2019 |
07/2010, 09/2010,
10/2010, 09/2012, 12/2012, 06/2013, 07/2014, 07/2015, 07/2016, 07/2017, 08/2018, 11/2018, 12/2018, 01/2019 04/2019 |
ilAA-/Stable, ilAA-/Stable,
ilAA-/Negative, ilAA-/Watch Neg, ilAA-/Negative, ilAA-/Stable, ilAA-/Stable, ilA+/Stable, ilA+/Stable, ilA+/Stable, ilA+/Stable, ilA+/Stable, ilA+/Stable, ilA+/Stable, ilA+/Stable |
||||||
| F | S&P Maalot | ilA+ | ilA+ | 01/2019 and 04/2019 |
07/2017, 09/2017,
12/2017, 01/2018, 08/2018, 11/2018, 12/2018, 01/2019 04/2019 |
ilA+/Stable, ilA+/Stable,
ilA+/Stable, ilA+/Stable, ilA+/Stable, ilA+/Stable, ilA+/Stable, ilA+/Stable, ilA+/Stable |
||||||
| G (3) | S&P Maalot | ilA+ | ilA+ | 01/2019 and 04/2019 | 12/2018, 01/2019, 04/2019 | ilA+/Stable, ilA+/Stable, ilA+/Stable | ||||||
(1) In August 2018, S&P Maalot affirmed the Company’s rating of
“ilA+/Stable”.
(2) For details regarding the rating of the notes see the S&P Maalot
report dated August 13, 2018.
(3) In January 2019, the Company issued Series G Notes in a principal
amount of NIS 225 million.
* A securities rating is not a recommendation to buy, sell or hold
securities. Ratings may be subject to suspension, revision or withdrawal
at any time, and each rating should be evaluated independently of any
other rating
Summary of Financial Undertakings (according to repayment dates) as
of March 31, 2019
a. Notes issued to the public by the Company and held by the public,
excluding such notes held by the Company’s parent company, by a
controlling shareholder, by companies controlled by them, or by
companies controlled by the Company, based on the Company’s “Solo”
financial data (in thousand NIS).
| Principal payments |
Gross interest |
|||||||||||
|
ILS linked |
ILS not linked |
Euro | Dollar | Other | ||||||||
| First year | – | 109,228 | – | – | – | 25,779 | ||||||
| Second year | – | 268,035 | – | – | – | 27,284 | ||||||
| Third year | – | 268,035 | – | – | – | 22,216 | ||||||
| Fourth year | – | 181,307 | – | – | – | 17,576 | ||||||
| Fifth year and on | – | 520,113 | – | – | – | 37,480 | ||||||
| Total | – | 1,346,718 | – | – | – | 130,335 | ||||||
b. Private notes and other non-bank credit, excluding such notes held by
the Company’s parent company, by a controlling shareholder, by companies
controlled by them, or by companies controlled by the Company, based on
the Company’s “Solo” financial data – None.
c. Credit from banks in Israel based on the Company’s “Solo” financial
data (in thousand NIS).
| Principal payments |
Gross interest |
|||||||||||
|
ILS linked |
ILS not linked |
Euro | Dollar | Other | ||||||||
| First year | – | 52,132 | – | – | – | 5,145 | ||||||
| Second year | – | 52,132 | – | – | – | 3,859 | ||||||
| Third year | – | 52,132 | – | – | – | 2,600 | ||||||
| Fourth year | – | 44,779 | – | – | – | 1,332 | ||||||
| Fifth year and on | – | 28,439 | – | – | – | 536 | ||||||
| Total | – | 229,614 | – | – | – | 13,472 | ||||||
Summary of Financial Undertakings (according to repayment dates) as
of March 31, 2019 (cont.)
d. Credit from banks abroad based on the Company’s “Solo” financial data
– None.
e. Total of sections a – d above, total credit from banks,
non-bank credit and notes based on the Company’s “Solo” financial data
(in thousand NIS).
| Principal payments |
Gross interest |
|||||||||||
|
ILS linked |
ILS not linked |
Euro | Dollar | Other | ||||||||
| First year | – | 161,360 | – | – | – | 30,924 | ||||||
| Second year | – | 320,167 | – | – | – | 31,143 | ||||||
| Third year | – | 320,167 | – | – | – | 24,816 | ||||||
| Fourth year | – | 226,086 | – | – | – | 18,908 | ||||||
| Fifth year and on | – | 548,552 | – | – | – | 38,016 | ||||||
| Total | – | 1,576,332 | – | – | – | 143,807 | ||||||
f. Off-balance sheet Credit exposure based on the Company’s “Solo”
financial data (in thousand NIS) – 50,000 (Guarantees on behalf of a
joint arrangement, without expiration date).
g. Off-balance sheet
Credit exposure of all the Company’s consolidated companies, excluding
companies that are reporting corporations and excluding the Company’s
data presented in section f above – None.
h. Total balances of the
credit from banks, non-bank credit and notes of all the consolidated
companies, excluding companies that are reporting corporations and
excluding Company’s data presented in sections a – d above – None.
i.
Total balances of credit granted to the Company by the parent company or
a controlling shareholder and balances of notes offered by the Company
held by the parent company or the controlling shareholder – None.
j.
Total balances of credit granted to the Company by companies held by the
parent company or the controlling shareholder, which are not controlled
by the Company, and balances of notes offered by the Company held by
companies held by the parent company or the controlling shareholder,
which are not controlled by the Company – None.
k. Total balances
of credit granted to the Company by consolidated companies and balances
of notes offered by the Company held by the consolidated companies –
None.
1 The quarterly financial results are
unaudited. The Company has applied the standard IFRS 16 – Leases, from
January 1, 2019. The effects of the application of the standard on the
quarterly financial results are provided in this press release, and in
particular in the section “IFRS 16”. The impact of the adoption of IFRS
16 on Adjusted EBITDA in Q1 2019 was an increase of NIS 39 million.
2 For the definition of this and other Non-GAAP financial
measures, see “Use of Non-GAAP Financial Measures” in this press release.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190529006055/en/